We're buying the dip in a defensive stock — still not convinced by this year's market rally

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We're buying 50 shares of Procter & Gamble (PG) at roughly $139 each. Following Wednesday's trade, Jim Cramer's Charitable Trust will own 815 shares of Procter, increasing its weighting in the portfolio to about 3.93% from 3.70%. Shares of household product giant P & G have been hit hard over the past few weeks due to a market rotation out of defensive companies that outperformed last year. P & G lost about 7% in 2022's terrible year, much less than the S & P 500 's more than 19% decline in 2022. Last week, some people also had a mixed view regarding the company's earnings report on concerns that Procter's 10% pricing gains masked a deterioration in volumes and a weakened consumer. We argued this was not the case . Sure the 6% decline in sales volume was more noticeable from the prior quarter when volume fell 3%. Normally, worsening volume trends would raise a red flag for any consumer product company that is at risk of consumers trading down to less expensive brands to save on money. But in this case, the decline can easily be explained away as either temporary or general issues unrelated to the health of the core business. For example, 1 percentage point of the volume decline was due to P & G cutting its Russia portfolio in half due to Moscow's unprovoked war on Ukraine. Another 2 percentage points were Covid lockdown-driven, temporary inventory reductions in China, which is one of P & G's biggest markets. We expect sales there to pick up as people reemerge from pandemic restrictions and mobility improves in the second half of this year. (There were also some inventory reductions in Europe.) If we back out these 3-percentage-point drags, what really happened was a 3% decline that was in line with management's expectations when they push through large price increases. As for guidance, we were hoping to see P & G management raise its earnings-per-share (EPS) outlook off improving sales and a lower cost outlook, but they simply reiterated their view. Although we got one piece with management improving their sales guidance, headwinds related to foreign exchange, commodities, and transportation are still weighing on profits. Those three headwinds are starting to improve directionally, but the benefits have not been enough to flow through to the bottom line. Still, we think this happens sometime later this year as commodity prices are well off their highs, freight costs have fallen, and the U.S. dollar has weakened in the past several months against a basket of foreign currencies. Remember, P & G's earnings are dependable, unlike say tech, which looks like it still may go through another round of estimate cuts based on the soft guide last Thursday from Microsoft (MSFT), also a Club holding. Another reason to like Procter & Gamble is its rich history of returning cash to shareholders. It's a so-called dividend aristocrat , thanks to its 66 consecutive years of increasing its annual dividend payment. The current annual dividend yield, based on current stock prices, is about 2.6% — and that pays us as we wait out this period of economic uncertainty. There's also a share repurchase program that management steadily deploys every quarter. P & G bought back $2 billion worth of stock in the December quarter as part of its commitment to repurchasing $6 billion to $8 billion worth of stock in its current fiscal year. PG 1Y mountain Procter & Gamble (PG) 1-year performance With P & G shares down about 8% year to date, we're viewing the recent decline as an opportunity to add to our position. We're buying back half of the 100 shares we trimmed at about $152 in mid-December, and upgrading the stock back to a 1 rating . (Jim Cramer's Charitable Trust is long PG and MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A person works with robots at Procter & Gamble's factory in Tabler Station, West Virginia, May 28, 2021.

Timothy Aeppel | Reuters